Giving banks' critical role as middlemen in the economy, Mrs Kelly argued the costs of larger capital buffers would flow on to customers and the broader community, and there was a need to debate this trade-off.

"Those costs will flow through to impact the economy more broadly, noticing and noting that banks are strong intermediaries within the Australian economy," she said.

ANZ Bank chief Mike Smith has also argued that any moves to increase banks' top tier capital may be passed on in the form of higher interest rates to borrowers.

The concern from bank chiefs comes after analysts have highlighted the downside of bigger capital buffers for bank investors, with some saying banks could be forced to dilute shareholders and raise equity.

However, the debate comes at a time when the industry is benefiting from a rebounding property market and very low default rates among borrowers.

In the year to September, Westpac's flagship retail and business banking arm underpinned strong earnings across the group, after a campaign to lift its rate of new lending aggressively.

Mrs Kelly singled out the performance of Westpac's Australian Financial Services division, which accounts for the bulk of profits and houses its core home lending and business lending arms, and St George.

Home lending grew by 7 per cent, personal lending jumped 24 per cent and business loans were up 8 per cent. Profits were also enhanced by a further decline in the charge for bad debts, which fell 23 per cent to $197 million.

Mrs Kelly was upbeat on the economy, saying housing credit would continue to grow at current rates and business borrowing would accelerate.

Shareholders will receive a fully franked final dividend of 92c, to be paid on December 19, taking the full-year pay-out to $1.82. Unlike last year it will not pay a special dividend.

Return on equity, a key gauge of profitability, rose 48 basis points to 16.4 per cent

Alphinity fund manager Andrew Martin said Westpac was experiencing similar trends to other big banks, including the sharp fall in bad debts.

"Whenever there's a low ad and doubtful debt number, the question always comes up around quality.. and how much lower can it go," he said.

Investors are also eyeing the potential impact of any restrictions that regulators may impose on the housing market to prevent it overheating, especially in Sydney.

Figures from RP Data CoreLogicon Monday showed Sydney prices grew at 13.1 per cent in the year to October, with Melbourne prices up 8.9 per cent.

Macquarie analyst Mike Wiblin said Westpac would be most affected by any new "macroprudential" restrictions on investor lending. It is the most skewed towards property investors of the big four banks, with investors making 44 per cent of its mortgage book.

"They've benefited from the strength which has been coming out of NSW, which has been driven by investors in particular," Mr Wiblin said.

Mrs Kelly played down the likely impact of any new curbs on lending to investors, saying regulators would be "quote cautious" and want to avoid unintended consequences.